Walgreen Same-Store Sales Rise; Rite Aid Sales Down

Customers filled more prescriptions last month at Walgreen and Rite Aid, but were not enticed to buy summer goods such as sunglasses and lawn furniture.

Thursday's June sales reports show that consumers continue to be cautious, with both retailers posting lower sales of general merchandise at stores opening at least a year.

Pills

Aside from the sluggish economy, sales of seasonal items were also hurt by the wet weather and cool temperatures that blanketed much of the country.

U.S. drugstores get about two-thirds of their revenue from prescription sales, but sales of items such as candy and cosmetics can signal whether customers are willing to make more discretionary purchases.

Walgreen, the largest U.S. drugstore chain by revenue, said sales at stores open at least a year rose 3.4 percent in June.

Same-store sales were driven by a 5.8 percent increase in same-store sales at its pharmacy counters, while same-store sales in the front end of Walgreen stores dipped 0.9 percent.

The front-end same-store sales decline was "pretty disappointing" especially since sales have gotten a boost from higher tobacco taxes in recent months, said Pali Capital analyst Robert Summers.

Walgreen is working on an overhaul that includes slowing its store opening plans and weeding out extraneous merchandise.

Its shares fell last month after it reported a steeper-than-expected drop in quarterly profit and slipped less than 1 percent Thursday.

"For a while they have been getting the benefit of the doubt and I think that numbers like this will make it more challenging for people to approach it that way," said Summers, who rates the shares "neutral."

Walgreen said its same-store sales benefited by having one more weekday in June 2009 than a year earlier. Customers tend to fill more prescriptions on weekdays than on weekends. Also, more patients filled 90-day prescriptions, which count as three 30-day prescriptions in the month in which they are filed, which aided pharmacy sales.

Sales Fall at Rite Aid

Rite Aid, the third-largest U.S. drugstore chain, has been working on its own changes such as store remodeling and improving liquidity. On Wednesday, Moody's changed its outlook on Rite Aid to "stable" from "negative" after the company obtained a new $1 billion senior secured revolving credit facility.

Rite Aid's sales tend to lag those of Walgreen and did so again in June. Rite Aid's same-store sales slid 0.6 percent in the four weeks that ended June 27. They rose 1.4 percent in its pharmacy sections and fell 4.5 percent at the front end.

The company said sales continued to be more sluggish at the Brooks and Eckerd stores it acquired from Canada's Jean Coutu in 2007 than at its other stores.

Total June sales rose 9 percent to $5.24 billion at Walgreen and declined 2.5 percent to $1.97 billion at Rite Aid. Pharmacy sales accounted for 66.7 percent of total sales for the month at Walgreen and 67.9 percent at Rite Aid.

As of late June, Walgreen had 6,902 drugstores, 605 more than a year earlier, while the number of Rite Aid stores had fallen by 166, to 4,822.

Walgreen's shares slipped, as did shares of Rite Aid .

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